The tax returns may not reveal all Trump’s business ties
President Trump does business through a web of LLCs, and that makes it likely that basic facts are obscured, including the names of the individuals or banks to which he pays interest.
By Allan Sloan
Every week seems to bring yet another revelation about possible relationships between Russia and people close to Donald Trump. Combine that with the fact that this is the height of tax preparation season, and you can see why lots of people seem obsessed with finding a supposed Russian connection in Trump’s tax returns.
Hence the increased demands for Trump to make his returns public the way presidents and presidential candidates have done since Richard Nixon, but that Trump has refused to do despite initially saying that he would.
However, even if Trump has business ties with Russian oligarchs or the Russian government — please note the “if” because there is nothing suggesting that is the case — it’s highly unlikely that evidence of that would show up in his personal tax returns. That’s the unanimous opinion of three respected tax experts I consulted, none of whom is an apologist for Trump.
A primary reason, they told me, is that Trump does business through hundreds of entities, including partnerships, corporations and LLCs (short for limited liability companies).
If you could read the relevant documents — IRS Forms 1040 and 8938 and Schedules C, E and S — you would see that unless Trump has a personal Russian bank account or shows a gain or a loss on the sale of a Russian security or property, financial results of Russian dealings (if they exist) would likely be lumped in with hundreds of other dealings rather than being broken out specifically.
In fact, searching for a Russian connection in Trump’s returns is a diversion from the real reasons the American public has a stake in seeing them.
We’ll get to those. But first, let’s see what the experts have to say.
“Tax forms don’t require much specificity,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. Rosenthal, who has helped news organizations including The New York Times and The Washington Post parse Trump tax documents, says that, “You’re not going to see an entry that says, ‘Loan from Russian oligarch.’… Even if you borrowed money directly from the Russian government, you don’t have to say to whom you paid the interest.”
“Trump’s income is derived from the business entities — LLCs, corporations and partnerships — in which he owns interests,” says tax lawyer Bob Lord, an associate fellow with the Institute for Policy Studies who was an informal adviser on tax matters to Bernie Sanders’s campaign.
“It is possible, albeit unlikely, the tax returns of the business entities in which Trump owns an interest might reveal a relationship with Russia or a Russian oligarch,” Lord added. “Because Trump’s personal tax return will reflect only the income or loss flowing to Trump from those entities, his personal tax return would not be a reliable indicator of whether such a relationship exists.”
And now, to our third expert: Bob Willens of Robert Willens LLC, who for decades has helped journalists, including me, understand complex tax and accounting issues.
“I’m sure that whatever he’s done — if he’s done anything — is through LLCs. It would likely not show up on his returns,” Willens said. “Even if there aren’t any mentions of Russia on his return, it doesn’t mean that he doesn’t have relationships with Russia. Or that he does.”
If we are highly unlikely to find a Russian connection (should it exist, and again, there is no evidence that one does) in Trump’s tax returns, why do we have a stake in seeing them?
For the same reason it’s in our interest to see the tax returns of presidents, vice presidents and candidates for those offices: It’s important to see what kind of people they are, and to what extent they’re helping to pay for the country they’re running or want to run.
That’s especially important in Trump’s case, given how he and his family are imposing unprecedented costs on taxpayers for travel and security. The partial Trump tax returns that have surfaced show him paying no federal income tax in past years because of highly inventive and aggressive strategies. (Legal, yes, but shocking just the same.) And he may well not be paying significant federal income tax now.
During the campaign, Trump excoriated hedge-fund and private-equity managers who use the “carried interest” loophole to pay only the 23.8 percent capital gains rate on their share of their investors’ long-term profits rather than the 39.6 percent they’d pay if carried interest were treated as an incentive fee.
Given those attacks — and given the fact that Trump is proposing to enact major changes in our tax laws — it seems only right for us to know what Trump’s tax rate is. If anything.
Based on what the three experts told me and on my own experience, I think the likely reasons Trump won’t release his tax returns are that he may pay little or no income tax, may make few if any charitable contributions and his return might have entries that aren’t consistent with his claim to be worth more than $10 billion.
In addition, although his returns are unlikely to show a Russian connection, they may offer hints of how to dig out information that Trump doesn’t want us to see.
The risk of obsessing about a Russian connection is that if Trump’s tax returns should surface and Russia’s not in them, Trump will be able to say, “See? Russia is fake news, time to move on.”
So let’s remember that we should see Trump’s tax returns for the same reason we got to see Barack Obama’s or George W. Bush’s or Bill Clinton’s: They tell us a lot that it’s good for us to know about the person running our country.
Derek Kravitz contributed research to this report.
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